京東 (JD) 2026 Q2 法說會逐字稿

Hello, and thank you for standing by for JD.com's second-quarter 2026 earnings conference call. (Operator Instructions) After management's prepared remarks, there will be a question-and-answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference, Sean Zhang, Head of Investor Relations.

Thank you, operator. Good day, everyone. Welcome to JD.com's second-quarter 2026 earnings conference call. With us today are JD.com CEO, Sandy Xu; and CFO, Mr. Ian Shan. Sandy will kick off the call with her opening remarks, and Ian will discuss the financial results. Then we'll open the call to questions from analysts. Please note, unless otherwise stated, all comparisons in this call will be against our results from the comparable period of 2025.

Before turning the call over to Sandy, let me quickly cover the Safe Harbor. Please be reminded that during this call, our comments and responses to your questions reflect management's view as of today only. We will include forward-looking statements. Please refer to our latest Safe Harbor statement in the earnings press release on the IR website, which applies to this call. We will discuss certain non-GAAP financial measures. Please refer to the reconciliation of non-GAAP measures to the comparable GAAP measures also in the earnings press release. Please also note that all figures mentioned in this call are in RMB, unless otherwise stated.

With that, let me turn the call over to our CEO, Sandy. Sandy, please.

Thank you, Sean. Hello, everyone. Thank you for joining our second-quarter 2026 earnings conference call. We closed the second quarter with steady performance in line with our expectations maintaining strong operational resilience amidst macro and industry headwinds. We are navigating a high-trading comparison base, upstream price pressure in consumer electronics, and evolving macro dynamics.

Our commitment to high-quality momentum translated to robust profitability. Most notably, Q2 marked definitive turning point for our profitability trajectory. Our non-GAAP net income attributable to ordinary shareholders surged by 21% year on-year to RMB8.9 billion, driven by both JD Retail's healthy margin expansion and JD Food Delivery's loss reduction.

In particular, both JD Retail gross margin and operating margin hit historic highs for peak promotional seasons. And JD Food Delivery narrowed its losses by over 50% year on year in the quarter. This performance underscores the unique strength of our business model. Even in a complex external environment, it continuously enables us to deepen our supply chain capabilities, unlock operational efficiencies across our business ecosystem, and drive sustained profit expansion.

Moving to our operational highlights, I would like to share three key developments for the quarter. First, we maintained healthy user momentum while dramatically improving marketing efficiency in the quarter across key metrics, including MAU, quarterly active customers, and plus members, we sustained double-digit year-on-year growth.

Our June 18 grand promotion also set a new record for purchasing users. Crucially, we achieved this user expansion while streamlining group marketing expenses supported by enhanced operational efficiency and marketing optimization across JD Food Delivery and JD Retail.

We maintained a high-quality user momentum in Q2, primarily driven by deeper engagement among existing users. Notably, our efforts to provide diversified services catering to our users' needs, such as Healthcare, Home Services, and Outdoor or Aftermarket Services, resonated strongly with our users, contributing to deeper user engagement and stickiness.

In Healthcare, we provide users with a full set of online and offline services from consultation to pharmacy and on-site care. In Home Services, revenues increased exponentially year-on-year in Q2. And in auto aftermarket services, our JD Auto service offline stores have covered over 1,000 districts and counties across China as of Q2. Overall, this reflects our strategic shift from user acquisition toward elevating user quality and lifetime value. Through disciplined lifecycle management, we are successfully converting new users into highly sticky loyal customers.

Second, core JD Retail delivered a resilient top-line performance in Q2, while continuing to unlock profitability upside. Heading into Q3, we expect JD Retail to hit a turning point, reaccelerating into positive top-line expansion while sustaining healthy bottom line. Looking at category performance, while revenues from electronics and home appliances were moderated by a high comparison base and upstream price increase in Q2. As momentum picked up in June, our market position and user share remains firmly intact amid these market dynamics.

Looking into the second half of the year, we expect top-line growth for this category to accelerate from the first half as the high comparison base from the trade-in program fades and our strong supply chain capabilities allow us to navigate consumer electronics price cycles more effectively.

General merchandise maintained healthy growth in the second quarter. In particular, our supermarket category remained a key standout, delivering near double-digit year-on-year revenue growth with a proven multiyear track record.

JD Supermarket has established itself as the most attractive platform for both users and suppliers. This success is a powerful example, demonstrating how our core philosophy, the relentless pursuit of superior user experience, cost optimization, and operational efficiency translates into sustainable market leadership. Other general merchandise categories, such as Healthcare and Industrial Products, also delivered solid double-digit growth in the quarter. As we further tap into massive time, supported by our supply chain efficiency and strong user mind share we remain confident in our execution for the remainder of the year and beyond.

In addition to delivering resilient top-line performance, JD Retail achieved further profitability improvement in the second quarter. Its gross margin expanded by 1.3 percentage points year on year to 18.5% mainly attributable to two drivers: deepening supply chain scale benefits and a favorable revenue mix, supported by high-margin marketplace and marketing revenues particularly the rapid growth in advertising revenues. JD Retail's operating margin increased by 7 basis points to 4.6%, setting a new record for peak promotional quarter.

Beyond the gross margin expansion, this performance also reflects our ROI-driven marketing spend. This allowed us to direct more resources towards R&D capabilities, which is fully aligned with our long-term business strategies.

Moving on to new businesses. Through our focus on operational efficiency, we substantially reduced losses in new businesses, particularly in JD Food Delivery, while maintaining disciplined execution against our strategic road map. During the second quarter, JD Food Delivery maintained healthy order volume momentum while narrowing total losses by over 50% year on year. Within just one year of execution, JD Food Delivery has achieved a dramatic fast-paced improvement in unit economics, driven by our relentless focus to drive operational efficiency and revenue diversification.

Moving forward, we see substantial runway for further UE optimization in our Food Delivery business while we continue to unlock its cross-segment synergies with our core retail business. Operations at our Joybuy and (inaudible) businesses advanced steadily along their strategic paths with strict ROI discipline. During the quarter, Joybuy sharpened its competitive edge in Europe through its fast, reliable fulfillment and premium localized services such as integrated delivery and installation service for home appliances.

By directly addressing local consumers' pain points, Joybuy is building increased user retention and has doubled its revenues within two quarters. UC continued to deepen its penetration in lower-tier markets. with QEC increasing over 40% year on year and contributing 40% of new active customers in Q2, unlocking valuable incremental user pools for our user eco -- flower ecosystem. While both businesses saw a sequential step-up in strategic investment. All spend was executed with rigorous discipline and strictly within our expectations.

Beyond operational execution, we accelerated the integration of AI and the physical automation more deeply into our core value chain in the second quarter, spanning demand forecasting, product sourcing, intelligent customer services and full stack logistics automation. Next-generation shopping and conversion, we are proactively upgrading our search, recommendation and targeting engine, along with our proprietary AI shopping agents by leveraging AI to sharpen precision in user intent, matching and traffic allocation. We have driven tangible improvement in user engagement, conversion, and ROI for our brand partners.

On enterprise productivity and efficiency, internally, we are seamlessly integrating generative AI into automated customer service and cross-departmental workflow. This deep integration is delivering measurable progress enhancing customer satisfaction while structurally refining our cost structure and driving long-term operational efficiency. On the logistics automation, our progress in physical logistics automation gives us substantial headroom to further optimize our cost structure and operating efficiency.

In warehousing and sorting through JD Logistics, expanded deployment of our proprietary LangzuTech Goods-to-Person solution across more warehouses and product categories. In autonomous delivery, JDL scaled thousands of unmanned (inaudible) vehicles across more than 20 provinces as of Q2 while launching our first 24/7 overnight autonomous delivery routes in Shenzhen. Powering this automation is our Jingdong Logistics foundation model LLM, which drives real-time intelligent decision-making within our exclusive automated operating framework.

In summary, our teams executed with strategic consistency and resilience throughout the second quarter. Looking ahead to the second half of 2026, we remain fully committed to our strategic priorities while responding with agility to evolving macro trends. Our core JD Retail business will continue to drive efficiency gains across every link around the supply chain and new businesses will unlock strategic potential while maintaining strict financial discipline. Combined with our integrated AI capabilities, we are confident in building a resilient business that delivers high-quality, sustainable development through all market cycles.

With that, let me turn the call over to Ian.

Thank you, Sandy. Hello, everyone. Thanks for joining the call today. In the second quarter, we delivered a high-quality financial performance anchored by robust bottom-line expansion while Electronics and Home Appliances performance was temporarily tempered by high comparison base leading total revenues to decrease slightly by 2.9% year on year. Our core secular growth drivers, including general merchandise categories, and marketplace and marketing revenue, maintain healthy momentum.

Meanwhile, facing external challenges, we sharpened our focus on supply chain capabilities and operational efficiency, and these moves paid off clearly on our bottom line. Our non-GAAP net income rose 20.8% year on year to RMB8.9 billion in Q2, with net margin expanding by 0.5 percentage points to 2.6%, backed by robust profitability of JD Retail and the ongoing financial optimization of JD Food Delivery.

As we headed into the second half of the year, we are confident to return to positive growth on the top line while unlocking further profitability through our supply chain strength and robust execution. Alongside our resilient financial performance, we remain committed to shareholder return. During the first half of the year, we repurchased a total of approximately 69.9 million Class A ordinary shares, equivalent to [34.9 million ADS] for a total of USD1 billion. This represents around 2.5% of our ordinary shares outstanding as of December 31, 2025.

Now let's go through our Q2 financial performance. Total revenues were RMB346 billion in Q2, reflecting a 2.9% year-on-year decline as we navigated near-term category dynamics. Breaking down the mix, our product revenues reflected divergent performance across categories. Electronics and Home Appliances managed through the combined headwind of a high trading base and upstream component price increase. General merchandise remained a resilient growth anchor led by Supermarket category which sustained rapid near double-digit revenue growth for the quarter.

This performance highlights the strength of our multi-engine growth model across different market cycles. Looking into Q2 -- second half, we expect growth momentum to accelerate across categories as we continue to elevate the experience through our superior product selection, price competitiveness, and service quality. Service revenues grew by 6.8% year on year in Q2.

Within this line, Marketplace and Marketing revenues were up 8.3%, primarily driven by higher growth in advertising revenue. Although growth moderated relative to previous quarters against a high user traffic base. Marketplace and Marketing revenues consistently outpaced the product sales. We expect this structural shift to continue serving as an important driver for our margin expansion over time.

Logistics and other service revenues increased by 5.9% year on year in the quarter. The pace normalized as our food delivery business left its initial launch and entered a full comparable year-on-year period starting this quarter.

Now, let's turn to our segment performance. JD Retail revenues came in at RMB295 billion in Q2, down 4.7% year on year in the second quarter, in line with expectations as we navigated category specific base effects and market dynamics. Notably, as our continuous efforts in supply chain and user experience gain traction, momentum picked up in June. We expect this recovery trajectory to build further into Q3, making a path back to positive revenue growth for JD Retail. In terms of profitability, JD Retail delivered exceptional results in the second quarter.

Gross margin expanded by 1.3 percentage points year-on-year to 18.5%. This marks JD Retail's 17th consecutive quarter of year-on-year gross margin expansion, a strong testament to our ability to consistently unlock profit potential across market cycles.

In addition, JD Retail's non-GAAP operating profit reached RMB13.5 billion in Q2 with operating margin up 7 basis points to 4.6%, a record high for promotional season. We achieved this milestone and increased investments in research and development capabilities. Thanks to gross margin expansion and improved marketing efficiency which provided us great financial flexibility to steadily reinvest for long-term growth.

In particular, JD Retail's marketing expense ratio dropped year on year for the fourth consecutive quarter. Overall, this set of results is a clear proof of our business model resilience, our deepening supply chain capabilities, and favorable revenue mix can effectively cushion short-term top-line fluctuations driving better profitability through operational quality rather than single-scale expansion.

Moving on to JD Logistics. Its revenues grew by 24.3% year on year to RMB68.1 billion in Q2 primarily driven by incremental contribution from on-demand delivery service. JD Logistics non-GAAP operating income reached RMB2.3 billion, up 15.6% year on year, representing an operating margin of 3.5%. JD Logistics' near-term margin fluctuations were mainly attributable to Deppon, while the rest of JD Logistics business maintained a healthy profitability trajectory.

Turning to our new business. Revenues came in at RMB7.3 billion in Q2. The year on year decline was driven by the shifting of recognition of on-demand delivery revenue from new business to JD Logistics, which took effect in Q1 2026. Profitability in this segment improved notably with operating loss narrowing significantly year on year to RMB9.9 billion. This was primarily driven by a more than 50% loss reduction in JD Food Delivery, highlighting our strong execution in optimizing its unit economics through streamlined operations, revenue diversification, and strict ROI discipline as market competition normalized. We are confident that our food delivery business will continue to see meaningful year-on-year loss reduction throughout the rest of the year.

Meanwhile, investments in Joybuy and Jingxi progressed in line with our strategic road map. Notably, Joybuy delivered encouraging sequential revenue growth in Q2 as our overseas supply chain strength and the differentiated service offerings continue to gain traction among European consumers. While absolute operating loss expanded as Joybuy entered a rapid scaling phase, its loss margin narrowed sequentially, demonstrating our distinct approach to business expansion and continuous operational refinement.

Turning to our consolidated profit performance. Group-level gross margin expanded meaningfully by 1.2 percentage points year on year to 17.1% in Q2, reaching a near all-time high. This expansion was primarily driven by JD Retail's remarkable margin performance on operating expense. Total operating expense decreased by 4.4% year on year in the quarter with the expense ratio decreasing by 0.3 points. This operating leverage was largely driven by optimized marketing spend, which was partially offset by step up R&D investments, particularly scalable AI applications.

This leaner OpEx structure reflects our strategic focus on operational efficiency and bottom line quality over low ROI volume expansion. As a result, our consolidated non-GAAP net income attributable to ordinary shareholders expanded by 20.8% year on year to RMB8.9 billion in Q2 lifting non-GAAP net margin by 0.5 percentage points to 2.6%. Q2 marks a definitive turning point for our consolidated profitability. And we are confident in sustaining this expanding profit trajectory as we move forward.

Turning to our liquidity. Last 12 months free cash flow as of the end of Q2 reached RMB31 billion, representing a significant improvement compared to RMB10 billion in the prior year period. This was primarily driven by disciplined working capital management, specifically a healthy acceleration in accounts receivable collections and normalized cash outflows associated with the trading program. By the end of Q2, our cash and cash equivalents, restricted cash and short-term investments totaled RMB235 billion.

In summary, the second quarter once again demonstrated the fundamental resilience of our business and the discipline of our strategic execution. Despite top-line headwinds, we unlocked further margin upside in JD Retail, while maintaining disciplined ROI-driven investments in new business. Looking ahead to the second half of 2026, we believe we have reached a clear inflection point. Top-line growth is reaccelerating. Profitability continues on an upward trajectory, and deep AI integration is actively redefining both user experience and enterprise efficiency.

With solid operational momentum and strong balance sheet, we remain fully committed to delivering sustainable long-term value to our shareholders through high-quality growth expanding profitability, a disciplined approach to capital allocation, and consistent shareholder returns.

With that, I will turn it back to Sean. Thank you.

Thank you, Sandy and Ian. For the Q&A session, you are welcome to ask questions in Chinese or English. And our management will answer your question in Chinese, and will provide English translation for convenience purpose only. In case of any discrepancy, please refer to our management statement in original language.

Operator, we are opening the call for a Q&A session now.

(Operator Instructions) Kenneth Fong, UBS.

(spoken in Chinese) Despite the high base in second quarter, JD Retail still achieve an outperforming performance given the macro uncertainties, the front-loaded demand for [JD] electronics and home appliances categories and continued price hike. Could management share the outlook for this category for the growth trend in the second half of the year?

And my second question is about general merchandise growth rate, which have experienced slowdown in the second quarter. What were the core factors driving this? And can management share your view for the growth trend for these general merchandise categories over the upcoming quarters, please?

(spoken in Chinese)

Let me translate the answer to the first question. Kenny, thank you for your question. As you said, in the second quarter, JD Retail once again showed strong operating resilience. The performance of our Electronics and Home Appliance revenue was in line with our previous expectation. Despite the category faced some short-term pressure in the quarter mainly due to last year's high base and the price hikes in electronics driven by the higher raw material cost. Even so, backed by our strong supply chain capabilities and solid user mind share, we continue to strengthen our market position.

Notably, our market share across all major Home Appliance categories grew steadily in the second quarter, especially our omnichannel effort also paid off with offline, our offline business growing at a much faster pace. As a result, our overall performance remained more resilient in Home Appliances and Electronics category than the industry. As you already know, we opened JD Mall in Shanghai and Hong Kong, and we welcome analysts and investors to pay your visits.

Looking into the second half while the ongoing rising consumer electronic price may continue to weigh on consumer demand, we remain confident that this category will grow, growth will improve meaningfully in the second half for three reasons. Number one, the base effects start to gradually normalize. Starting from Q3, the drag from last year's high trade-in base will gradually ease. Growth in electronics and home appliance is expected to reaccelerate as comparison bases normalize.

Second, supply chain capabilities mitigate -- we are using our supply chain capability to mitigate the price pressures. We continue to strengthen our supply chain capabilities, which is our strong competitive advantage through proactively planning an agile inventory management we can effectively cushion the impact of rising consumer electronics prices. This helps us maintain robust operating resilience while delivering competitive prices to our users.

Third, is our product innovation. Rapid AI growth is unlocking opportunities for our product and category innovation. We work closely with brands to co-develop new products using these new technologies. Our JoyInside has partnered with nearly 200 brands leveraging JD's AI capability to enable smarter interaction across home appliance and robots, delivering a smarter and more convenient user experience.

So over the long term, we remain highly confident in our leadership in the Electronics and Home Appliance category while sales may fluctuate in the short term, JD's unique value to brands become even clearer in certain times. We will continue to leverage our 1P supply chain efficiency to deliver more competitive prices and service to our customers while providing brands with a highly predictable and efficient sales channel.

(spoken in Chinese)

To your second question, yes, our general merchandise category was also impacted by the high base in last Q3. At the same time, not only the trading program directly boosted sales of home goods, it also joined force with our food delivery business to drive notable traffic to our platform. and drive cross-sell to a certain extent. So while general merchandise growth moderated somewhat in Q2 this year, we continue to, in fact, we continue to steadily gain market share across all general merchandise subcategory. Notably, Supermarkets, our largest category within general merchandise deliver a near double-digit resilient performance, while health care and industrial products maintain solid double-digit growth.

(spoken in Chinese).

Okay. Looking ahead, we are confident that general merchandise category will maintain healthy growth backed by several key drivers: number one, category operational excellence is enhancing user experience. We are seeing further upside in our IT supply chain capability for general merchandise category, especially in supermarket by expanding product selection, building price competitiveness and elevating service quality will enhance user experience and solidify JD's user mind share in general merchandise category.

Second, we see sustained user growth momentum. As user mind share for our general merchandise category deepens our user base continues to grow healthily new business, including food delivery and Jingxi are bringing notable incremental traffic and new users. Moving forward, we will enhance our user operation to boost conversion and drive cross-sell, and we see meaningful upside in general merchandise category sales.

Third is our improving platform ecosystem. We continue to onboard high-quality merchants and incubate emerging brands, incubating emerging brands while helping them optimize end-to-end operations. This allows merchants and brands to achieve more certain growth on JD while also bringing incremental sales to our platform at the same time. JD Retail 3P GMV growth has outpaced 1P for the past three consecutive quarters with its contribution to total GMV extending Q-on-Q in Q2. So overall, we expect JD Retail growth to accelerate quarter-by-quarter in the second half of the year.

Electronics and home appliance should steadily recover while general merchandise category maintained healthy growth. We also see a conversion efficiency improves and, our advertising revenue has a meaningful room to pick up speed. Thank you for your question, Kenny. We can go to the next analyst.

Ronald Keung, Goldman Sachs.

(spoken in Chinese) One is on your free cash flow. We're seeing you're entering into a much healthier free cash flow cycle in contrast to other mega caps in Internet, which are seeing CapEx exceeding operating cash flow for look at the mega cap. So with this unique positioning of JD yet I see some incremental investments, including some real estate. So will management consider setting a more official percentage of annual profits for shareholder returns.

Second is on Joybuy, seeing very fast growth there and is still pending acquisition of the German retailers. So how do you differentiate or plan to differentiate your price users experience or logistics experience further? And what is your investment budget for the second half and next year?

(spoken in Chinese)

In the first half of this year, we repurchased around 69.9 million ordinary shares for a total amount of USD1 billion. This represented 2.5% of our ordinary shares outstanding as of December 31, 2025. Under the previously announced three-year USD5 billion share repurchase program, the remaining amount is around USD1 billion, we expect to execute the program as planned. Our shareholder return ratio will remain firmly committed to creating value for our shareholders. We will continue to invest in business operations and supply chain capabilities to enhance JD's long-term competitiveness and value.

We will return value to shareholders through multiple forms, including healthy and sustainable business development, dividends and share repurchases. Our goal is to maximize long-term shareholder returns.

Our third, our track record also shows our strong commitment to shareholder returns. Since 2023, we have returned around USD13 billion to shareholders through dividends and share repurchases. On dividends, we have maintained annual dividend payments since 2022, and cash dividend per share stable even when profit fluctuated in 2025, providing shareholders with steady cash returns. On buybacks, we have repurchased around 17% of our outstanding shares since 2023. So going forward, we will remain committed to shareholder returns.

(spoken in Chinese)

Ronald, let me answer your second question. So Joybuy core strength lies in taking JD's long-standing supply chain capabilities overseas and localizing them in Europe, particularly in home appliance and electronics, where we have a clear edge driven by our efficient 1P retail and logistics fulfillment capabilities we offer a highly differentiated user experience, including integrated delivery and installation services. This has helped Joybuy gradually win stronger user recognition and mind share across Europe, increasing user retention and doubling Joybuy's revenue within 2 quarters.

(spoken in Chinese).

First, Joybuy is starting to establish a clear edge in user experience and retention powered by our own warehouse network in Europe. Joybuy now offers same-day and next-day delivery across major European cities, bringing place-an-order-in-the-morning, receive-it-in-the-afternoon hyperfast delivery services to over 40 million customers in Europe.

(spoken in Chinese).

You can see unlike other traditional, so-called traditional cross-border ecommerce platforms, JD leverage our supply chain to build a localized e-commerce model. We are strengthening our product offering proactively partnering up with top-tier brands and suppliers and delivering high-quality products to our local customers in Europe during Joybuy's recent Summer Black Friday sale in June, our 211 same-day delivery and one-stop delivery and installation service drove strong electronics and home appliance sales. Notably, during the heat wave in Europe, we saw strong sales of air conditioners where our one-stop delivery and installation service truly deliver a differentiated experience further boosting Joybuy brand reputation and customer satisfaction in Europe.

(spoken in Chinese).

Of course, Joybuy is still in a very early stage of capability building, so as we fortify our core supply chain strength across product selection and logistic fulfillment, in Q2, our investment in Joybuy grew modestly Q-on-Q, but its loss or loss margin improved sequentially. Over the coming quarters, we expect Joybuy's order volume to continue to grow quickly and logistic fulfillment efficiency improves and service coverage expands. Investment Joybuy is expected to increase accordingly. However, our investment will remain very disciplined and manageable. In addition, Joybuy's business model is consistent with JD's core model with supply chain at the center.

So as Joybuy scales, economies of scale will kick in and drive its continuous improvement in Joybuy's unit economics. Thank you. We can take the next question.

Your next question comes from Alicia Yap with Citigroup.

(spoken in Chinese) So for question is first is related to food delivery. So with the landscape stabilizing, what is JD's latest plan for your market share, user growth and also the cross-sell synergy targets. Second question is for marketplace and also marketing revenues. How can JV sustain faster growth rates amid the competition and also the slower consumption. What is your view on the growth expectations for this line item into the second half?

(spoken in Chinese).

Thank you, Alicia. Let me answer the first question regarding JD Food Delivery. JD Food Delivery has made solid progress. In the second quarter, the volume maintained healthy growth while narrowing total loss by over 50% year-on-year. So within just one year of execution, the unit economics improved meaningfully for this business, driven by refined operations and higher subsidy efficiency, we saw subsidy per order notably decreased year-on-year, enhanced efficiency at scale and growing contribution from commissions and advertising revenues.

(spoken in Chinese).

In terms of synergy with our core business, as a deeply embedded business within JD ecosystem, JD Food Delivery is leveraging, is delivering clear synergies. First, it creates strong synergy with our core retail business across user acquisition and cross-sell. Our quarterly active customer maintained solid double-digit year-on-year growth in the quarter. Secondly, enriches our location-based supplies and merchant ecosystem. And third, we are integrating the underlying procurement capabilities between food delivery and logistics which we believe will boost our on-demand delivery capabilities and efficiency.

(spoken in Chinese).

In terms of the long-term goal, we aim to maintain healthy scale growth in food delivery and continue to boost operating efficiency and unit economics. More importantly, we will deepen integration between food delivery and our core business to further unlock ecosystem synergies to drive sustainable user and revenue growth while lifting overall efficiency and profitability.

(spoken in Chinese)

For your second question, Alicia, JD remains committed to enhancing user experience without compromising its focus we will gradually drive monetization through improved efficiency. In the second quarter, our marketplace and marketing revenues sustained growth that outpaced our total revenues while advertising revenue showing faster momentum.

(spoken in Chinese).

Looking ahead to the second half of the year as our overall sales recover, we are confident in accelerating our advertising revenue growth. Meanwhile, we expect tech-driven efficiency gains. Category mix optimization and traffic pool expansion to help fuel sustained the momentum in our advertising business. On tech-driven efficiency, we have been driving ad distribution efficiency by integrating AI into our algorithm. This optimizes recommendation accuracy both in conversion rates and accelerating revenue growth.

Our category mix optimization on general merchandise categories, which have higher ad monetization rates are growing faster and taking a larger share of our total sales.

This mix shift structurally support our advertising growth. Our traffic pool expansion, new businesses, such as food delivery have brought incremental traffic to our platform, expanding our overall traffic pool for advertising. In addition to that, food delivery's own advertising capabilities continue to mature, contributing incremental ad revenue.

(spoken in Chinese).

Over the long term, as our platform ecosystem continues to improve and grow and as technology drives further efficiency gains, we expect our advertising revenue to maintain steady growth serving as one of the core drivers of our revenue and profit growth. Operator, we can go to the next question.

Thomas Chong, Jefferies.

(spoken in Chinese) My first question is, can management comment about second half JD Retail margin outlook. And my second question is about how we should think about the investment in new business. And on that front, how should we think about the group level profitability and net margin?.

(spoken in Chinese).

Thank you, Thomas. I will take your questions. In Q2, JD Retail's operating margin improved steadily. This was mainly attributable to first gross margin so sustained improvement. This is supported by product sales gross margin expansion as a result of enhanced operational and supply chain efficiency alongside an increasing contribution from high-margin commission and advertising revenue.

Second, JD Retail's marketing expense and expense ratio have been improving year-on-year, a trend we have seen for 4 consecutive quarters. While at the same time, we continued to place strong emphasis on R&D capabilities especially related to AI applications. JD Retail's R&D expenses increased notably in Q2.

(spoken in Chinese)

Looking into the second half of the year, we expect to improve supply chain efficiency to continue to drive higher gross margin for JD Retail. At the same time, we remain committed to long-term investments particularly in R&D for AI applications. We expect R&D expenses to maintain our growth trajectory for the near term, but we believe these investments are gradually translating into operational benefits, lifting long-term efficiency and optimizing the overall expense structure for JD Retail.

(spoken in Chinese).

Over the long term, we remain confident in achieving our high single-digit margin target. The key drivers include our first 1P capabilities with stronger 1P supply chain capabilities and scale benefits, we expect product sales gross margin to improve steadily. Second category upside. Categories such as supermarket still have a meaningful potential to improve its profitability. In addition, as we further refine product mix, electronics and home appliances categories also have room for margin expansion over time.

Lastly, platform ecosystem has high-margin service revenues such as commissions and advertising, grow at a rapid pace. We expect our revenue mix to further optimize serving as a structural driver for margin expansion.

(spoken in Chinese)

In terms of investment in new businesses and JD Group consolidated profitability first, our efforts and investments in new businesses are long-term initiatives with a focus on leveraging and enhancing our supply chain strength. These areas include international business, lower tier markets and on-demand retail and so on. as these new businesses gradually mature, synergies across our business ecosystem will continue to unfold, supporting long-term healthy growth and profit contribution.

(spoken in Chinese).

At present, our new businesses are at different stages of development and investment cycle. We remain committed to strict financial discipline focusing on ROI efficiency and will dynamically balance resource allocation across the new initiatives. Overall, we will ensure our profitability trend at the group level remain healthy. Specifically, in Q2, JD Food Delivery narrowed its losses by 50% year-on-year. Looking ahead, we remain focused on optimizing its unit economics and we expect further efficiency gains and a substantial narrowing of year-on-year losses in the second half of the year.

For international business, (inaudible) is early stage, it's showing fast-paced and healthy momentum with unit economics gradually improving, given its rapid development, our investment has scaled up accordingly. Going forward, we will invest at a measured pace and keep total investments for the business steady and within our control. As for Jingxi, as it effectively penetrates low-tier markets with differentiated supplies. It has brought in a large amount of new users and enhanced engagement for our platform. Moving forward, we expect Jingxi to drive rapid order growth while continuously improving its unit economics.

(spoken in Chinese).

On JD Group's profitability, Q2 marked a clear inflection in its trajectory, returning to healthy year-on-year expansion. Looking ahead to the second half of the year, supported by core business health and investment discipline, we are confident in driving accelerated profit growth at the group level. Over the long term, as our core retail business has further room to enhance profitability and new businesses continue to optimize ROI efficiency unlock synergies and gradually become new growth engines, we are well positioned to drive steady long-term profit expansion for the group.

So I think that's all the time we have for our Q&A. Back to operator.

We are now approaching the end of the conference call. I will now turn the call over to JD.com, Sean Zhang for closing remarks.

Okay. Thank you. Thank you for joining us today on the call, and thank you for your questions. As always, if you have further questions, please feel free to contact me and our team. We appreciate your interest and support in JD.com and really looking forward to talking with you again next quarter.

Thank you very much. Have a good day.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.